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Chapter 6 Facility and Inventory Management

Question 1
1 / 1 point
A larger capacity cushion can help firms uncover process inefficiencies, so they can find ways to correct them.
True
False
Question 2
Long-term capacity plans deal with:

1 / 1 point

workforce size.
overtime budgets.
investments in new facilities.
inventories.
Question 3
1 / 1 point
When future demand is uncertain and sequential decisions are involved in capacity planning, a manager should
use a:
decision tree.
cash flow analysis.
gap analysis.
waiting line model.
Question 4
1 / 1 point
Diseconomies of scale is a concept that states that the average unit cost of a service or good can be reduced
by increasing its output rate.
True
False
Question 5
Which one of the following statements about capacity cushions is best?

1 / 1 point

Constant demand rates require larger-capacity cushions.
Companies with flexible flow processes tend to have small capacity cushions.
Companies that have considerable customization tend to have larger capacity cushions.
Companies with high capital costs tend to have large capacity cushions.
Question
6

1 / 1 point

output. space. The plant operates eight hours per day. output measures are typically used.8 hours/unit for B. Question 7 1 / 1 point Regarding the measurement of capacity. Two major types of products are routed through the milling machine. space. 0 / 1 point True False Question 9 Utilization is the degree to which equipment. How many new milling machines are required if Stout does not resort to any short-term capacity options? 3 or 4 new machines 1 or 2 new machines No new machines More than 4 new machines Question 11 A wait-and-see capacity strategy does all of the following EXCEPT: 1 / 1 point . input measures are typically used.The degree to which equipment. The standard setup time for product A is 2 hours and 8 hours for product B. utilization becomes equal to capacity.5 hours/unit and 0. 1 / 1 point True False Question 10 0 / 1 point The single milling machine at Stout Manufacturing was severely overloaded last year. The batch size for A is 20 units and 40 units for B. five days per week. and 50 weeks per year. or labor is being used is commonly referred to as: capacity. when a firm provides a relatively small number of standardized products and services: capacity cannot be determined reliably. or labor is currently being used. Management prefers a capacity cushion of 15 percent. The standard processing time for A is 0. utilization. Question 8 A wait-and-see capacity strategy minimizes the chances of lost sales due to insufficient capacity. cushion. The annual demand for product A is 3000 units and 2000 units for product B.

000 board feet of lumber per day when run ten hours per day with minimal breaks. yielding reduced manufacturing costs. minimizes the chance of lost sales due to insufficient capacity. frequent jumps in capacity. stay ahead of demand. Over the past year. forestry legislation has reduced the availability of raw materials. meet capacity shortfalls with overtime. temporary workers. lag behind demand. workforce size. Question 13 Long-term capacity decisions that confront managers include all of the following except: 1 / 1 point capital equipment. Question 12 An expansionist capacity strategy does all of the following EXCEPT: 1 / 1 point involve small. Question 14 A wait-and-see capacity strategy: 0 / 1 point can result in economies of scale and a fast rate of learning. result in economies of scale and a fast rate of learning.575 board feet per day.000 board feet/day 219% . and stockouts. stays ahead of demand. minimize the chance of lost sales due to insufficient capacity. additional land. subcontracting. Question 1 / 1 point 15 A lumber mill is capable of producing 10. What is the capacity of the plant? 45. minimize the chance of lost sales due to insufficient capacity. so the mill has produced an average of 4. frequent jumps in capacity.75% 10. yielding reduced manufacturing costs. involves small. buildings.reduce the risk of overexpansion based on overly optimistic demand forecasts.

1 / 1 point True False Question 17 Large. have low utilization.575 board feet/day 45. have high utilization. 1 / 1 point True False Question 19 1 / 1 point A lumber mill is capable of producing 10.575 board feet/day Question 16 One reason economies of scale drive down cost is the spreading of fixed costs.75% 10.4. 1 / 1 point . What is the utilization of the plant? 4.000 board feet of lumber per day when run ten hours per day with minimal breaks. forestry legislation has reduced the availability of raw materials. so the mill has produced an average of 4. Over the past year.575 board feet per day.000 board feet/day 219% Question 20 1 / 1 point What information would managers use to choose the best cost-effective capacity to balance customer service with the cost of adding capacity? Waiting line models Capacity cushion Economies of scale Decision trees Question 21 Capacity is the maximum rate of output of a process. Question 18 Waiting line models are often used for capacity planning. infrequent jumps in capacity are characteristic of companies that: 1 / 1 point have a wait-and-see strategy. have an expansionist strategy.

subcontracting. reduces the risk of overexpansion based on overly optimistic demand forecasts. temporary workers. 1 / 1 point True False Question 24 Input measures of capacity are inherently more accurate than output measures of capacity. 1 / 1 point True False Question 25 An expansionist capacity strategy: 1 / 1 point can preempt expansion by competitors by announcing a large capacity expansion. which one of the following changes usually calls for a smaller capacity cushion? Higher yield losses More of a flexible-flow strategy . meets capacity shortfalls with overtime. 1 / 1 point True False Question 23 A smaller capacity cushion may be required if a process is highly capital intensive. and stockouts. Question 26 Which one of the following factors usually calls for a larger capacity cushion? 1 / 1 point High worker flexibility More reliable equipment High capital intensity Uncertain demand Question 27 1 / 1 point If a system is well balanced.True False Question 22 Capacity can be expressed by output or input measures. lags behind demand.

Higher customization Higher capital intensity Question 28 1 / 1 point A firm may preempt the expansion of competitive firms by using an expansionist capacity strategy and announcing a large capacity expansion. 1 / 1 point . What is the utilization of the plant? 73% 137% 7. the plant has produced an average of 7. True False Question 29 1 / 1 point A capacity cushion is the amount of inventory that a firm maintains to handle sudden increases in demand or temporary loss of production capacity.3 tons/day 10 tons/day Question 31 Which one of the following factors usually motivates a smaller capacity cushion? 1 / 1 point Unevenly distributed demands High capital intensity High penalty costs for overtime usage Requests for quick customer services Question 32 The time required to change a machine from making one product or service to the next is called: cycle time. True False Question 30 1 / 1 point A manufacturing plant is capable of producing 10 tons of product per day when run three shifts with no breakdowns and plenty of raw materials. setup time. Over the past week. hold time.3 tons per day because the third shift has devoted much of their time to preventive maintenance.

Setup times are negligible in this situation. Small capacity cushions are used extensively in capital intensive firms. True 1 / 1 point .000. 260 days per year. However. monthly and quarterly premium payments to a local insurance company. An operator can process one payment in 0. not in service organizations. Capacity cushions are used primarily in manufacturing organizations. The payments are processed by machine operators. or supply uncertainty. True False Question 35 1 / 1 point A larger capacity cushion may be required due to variation in demand. The department operates eight hours per shift. How many machines (not operators) are needed to satisfy the new total processing volume? (Round up to the next whole integer. it is expected to increase by 20 percent. changing product mix.25 minute. and bill payments for 85 of the bank's largest commercial customers. A capacity cushion of 20 percent is needed for the operation. with one operator per machine. Question 37 Capacity decisions should be made separate from strategic decisions. Large capacity cushions are used more often when future demand is level and known. Question 33 1 / 1 point The lock box department at Bank 21 handles the processing of monthly loan payments to the bank.) More than 8 Fewer than 7 8 7 Question 34 1 / 1 point A planning horizon is defined as the period beyond which the company does not have customer orders. two shifts per day. True False Question 36 Which one of the following statements concerning capacity cushions is best? 0 / 1 point Small cushions are used in organizations where the products and services produced often change. The average monthly (not annual) volume of payments processed through the department currently is 400.queue time.

0 / 1 point . What is the capacity of the plant? 10 tons/day 73% 7.False Question 38 0 / 1 point A manufacturing plant is capable of producing 10 tons of product per day when run three shifts with no breakdowns and plenty of raw materials. the number of customers served per hour. Over the past week. which one of the following changes usually calls for a larger capacity cushion? Higher inventories Requests for fast delivery times Higher capital intensity Higher worker flexibility Question 40 Input measures include such metrics as: the number of machine hours available. the plant has produced an average of 7.3 tons/day 137% Question 39 0 / 1 point If a system is well balanced. the number of bills processed in a week.3 tons per day since the third shift has devoted much of their time to preventive maintenance. the number of trucks produced per day.